Idaho Medicaid provides health care services, including prescription drugs, to low-income Idahoans. By law, Idaho Medicaid must reimburse pharmacies at the “estimated acquisition cost” of the drug. Idaho Medicaid primarily uses “average wholesale price,” as reported by drug manufacturers, as a basis for determining this amount.

If the manufacturer reports an inflated or false average wholesale price for a drug, taxpayers can pay too much for that drug through Medicaid reimbursements. For example, one unit of Johnson & Johnson’s pharmaceutical product, Duragesic, had a published average wholesale price of $52.066 in 2003, but Wasden’s investigation revealed an actual average wholesale price of $41.406 in 2003. This results in a 26% difference between the published price and the actual price.

“The publishing of false drug prices harms taxpayers and the State,” Attorney General Wasden said. “My office has investigated and litigated this matter and what we uncovered is that in a very large number of instances, drug manufacturers reported false and inflated prices for their drugs.”

The $2 million settlement is intended to reimburse taxpayers for the excessive prices Idaho Medicaid paid for prescription drugs as a result of inflated average wholesale price reporting. More than $479,000 will be deposited in the State’s General Fund to be appropriated by the Idaho Legislature. $50,000 will go to the consumer protection account to reimburse the Attorney General for investigative and legal costs. More than $1.1 million will go to the State’s Cooperative Welfare Fund and will be applied as a credit against the federal government’s next payment to Idaho Medicaid. The federal government pays for approximately 70% of the cost of the Idaho Medicaid program.

The settlement with Johnson & Johnson has been approved by the Fourth District Court in Ada County. The company admitted no liability or wrongdoing.

“This settlement addresses the harm incurred by Idaho’s taxpayers and the State,” Attorney General Wasden said. “It should stop the reporting of false and misleading drug prices and provide the State significant financial relief.”

Since 2005, Wasden has resolved 12 average wholesale price cases with drug manufacturers, including this settlement, resulting in more than $17 million recovered. Three average wholesale price cases, naming 11 other drug manufacturers, are still pending.